Economy teetering on ‘fiscal cliff' edge

Associated Press

Published 8:59 pm, Tuesday, August 14, 2012

WASHINGTON — Come January, be prepared for fewer air traffic controllers, FBI agents, border patrol officers and park rangers, as well as lower farm and winter heating subsidies. Less meat might get inspected. Furloughs likely will sweep across the government.

Even the weather

service could be affected.

The looming funding crisis in domestic spending is the result of automatic across-the-board cuts that go into effect Jan. 2 because of Washington's inability — so far — to reach a budget deal for achieving less red ink in the future.

The idea behind the automatic cuts, called a sequester in Washington parlance, was to force the warring sides to agree on a deal to slash out-of-control deficits that currently require the government to borrow 33 cents of every dollar it spends. The sequester was intentionally designed to be harsh if the negotiators couldn't agree — and they haven't yet.

While Republican defense hawks are up in arms over $55 billion in cuts that would slam the Pentagon next year and wreak havoc in the jobs-rich defense industry, there's been relatively little attention paid to a matching $55 billion cut from domestic programs. And those are the cuts most Americans are likely to notice.

"The situation on the domestic side is just as bad as the situation on the defense side, but you don't have as many contractors who are willing to lobby and scream publicly," said budget expert Richard Kogan of the liberal-leaning Center on Budget and Policy Priorities.

The effect of the cuts is shrouded in both debate and mystery. Alarmists warn that smaller airports would have to close for lack of air traffic controllers and say meat plants could be temporarily shuttered for a lack of inspectors. Others say agency managers will be able to mitigate much of the impact, especially if the automatic cuts are turned off after a short while.

Some of the biggest and most important programs are exempt from the cuts entirely: Social Security, Medicaid, food stamps, veterans' health care and federal employee pensions. Medicare cuts would be limited to 2 percent.

Day-to-day domestic programs funded by spending bills each year face cuts of about 8 percent. But since the new budget year begins Oct. 1 and the cuts don't take effect until Jan. 2, the mandatory reductions have to be absorbed in nine months and might therefore feel more like 12 percent.

Agency budget officials could begin husbanding resources in October, but only if they're willing to flout White House and congressional directives to maintain normal spending through the election and up to January.

Last year's budget law requires cutting every "program, project and activity" by an equal percentage, so managers have no choice but to cut payroll costs.

They're more likely, however, to furlough workers temporarily rather than lay them off, especially since few believe that Congress would let a sequester drag on for months. Laying off federal workers also takes time; generally they enjoy more legal rights than private-sector employees.

Once the election is over, intense negotiations are expected on sidestepping the sequester and the expiration of former President George W. Bush's tax cuts. The two events have been dubbed a "fiscal cliff" because many economists fear the combination will plunge the country back into recession.

While there's no

guarantee that the negotiations will bear fruit, few people in Washington believe a sequester would remain in place more than a few